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Is the Westpac Banking Corp (ASX:WBC) share price in the buy zone?

The Westpac Banking Corp (ASX: WBC) share price is on course to make it two consecutive days of gains on Tuesday.

At the time of writing the banking giant’s shares are up 1% to $26.92.

Why are Westpac shares pushing higher?

Investors appear to have responded positively to Westpac’s full year results release on Tuesday.

For those that missed it, Westpac posted cash earnings of $8,065 million in FY 2018. While this was flat on FY 2017’s result, it was slightly ahead of the market’s expectations.

The bank also declared a final dividend of 94 cents per share, bringing its full year dividend to a total of $1.88 per share.

Should you invest?

I thought that this was a solid result from Westpac, especially considering the negative impacts of a weakening housing market, the bank levy, and the Royal Commission.

While things certainly will not be easy in FY 2019, I still believe that the bank will be able to grow its earnings at a modest rate.

Because of this, the low multiples that its shares trade on, and its generous dividend yield, I think Westpac’s shares are in the buy zone right now.

And I’m not alone. A note out Goldman Sachs reveals that it has retained its buy rating on the bank’s shares. However, it has cut the price target on them to $32.84.

This lower price target still implies potential upside of approximately 22% over the next 12 months excluding dividends.

While the broker does see risks such as Westpac’s higher exposure to interest-only mortgage lending and the NSW property market, it believes the bank’s liquidity and funding position leaves it well-positioned to manage margin headwinds from mortgage competition.

In addition to this, the broker remains positive on the bank due to its CET1 ratio of 10.6% and the fact that its shares are priced at just 11x estimated forward earnings and offer a 7% dividend yield. These compare very favourably to its 15-year averages.

Overall, I agree with Goldman on this and think Westpac is well worth considering along with Australia and New Zealand Banking Group (ASX: ANZ) and ahead of Commonwealth Bank of Australia (ASX: CBA).

But if you're not keen on the banks then this hot dividend stock could be a better option for you. It looks well-positioned to continue growing its dividend at a solid rate for a number of years to come.

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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